August 18, 2008

Pandora is one of the nation’s most popular Web radio services, with about 1 million listeners daily. Its Music Genome Project allows customers to create stations tailored to their own tastes. It is one of the 10 most popular applications for Apple’s iPhone and attracts 40,000 new customers a day.

Yet the burgeoning company may be on the verge of collapse, according to its founder, and so may be others like it.

[...] The transformation of words, songs and movies to digital media has provoked a number of high-stakes fights between the owners of copyrighted works and the companies that can now easily distribute those works via the Internet. The doomsday rhetoric these days around the fledgling medium of Web radio springs from just such tensions.

Last year, an obscure federal panel ordered a doubling of the per-song performance royalty that Web radio stations pay to performers and record companies.

Traditional radio, by contrast, pays no such fee. Satellite radio pays a fee but at a less onerous rate, at least by some measures.

As for Pandora, its royalty fees this year will amount to 70 percent of its projected revenue of $25 million, Westergren said, a level that could doom it and other Web radio outfits.

U.S. officials have begun to consider the legal and policy problems that cyberwarfare presents, but cybersecurity experts said the government has been slow to resolve them in the face of an increasing likelihood that cyberattacks will be used to augment, or even supplant, typical military action.

“We are in a world where governments have not decided yet whether the tools of cyberattacks are weapons,” said Scott Borg, director of the U.S. Cyber Consequences Unit, a think tank that advises governments and companies. “We don’t have any really clear international understandings about these matters.”

“The Pentagon doesn’t have a policy on whether a cyberattack can be an act of war,” said Pentagon spokesman Lt. Col. Eric Butterbaugh, adding, “it’s ultimately the perception of the country under attack as to whether an act of war was committed.” The Pentagon has, however, assigned its Strategic Command to head up cyberprotection and cybercounter-attack operations.

Many music industry executives facing a CD sales slump love the sound of Guitar Hero and Rock Band.

The video games have millions of followers who memorize every note of songs so they can jam along — and they often buy the original version of their favorites. In addition to the publicity, the record labels get licensing fees from the game publishers.

But not all music industry executives are singing “Hallelujah.”

Edgar Bronfman Jr., chairman and chief executive of Warner Music Group, recently grumbled that the record labels deserved a bigger piece of the spoils from the games’ success.

“The amount being paid to the industry, even though their games are entirely dependent on the content that we own and control, is far too small,” he said during an Aug. 7 earnings call.

Bronfman suggested that he wanted Warner to be less a supplier than a partner. “If that does not become the case, as far as Warner Music is concerned, we will not license to those games,” he said.

The recording industry has long complained that it doesn’t receive its fair share of the proceeds from successful businesses built on music, such as MTV, the iPod and the iTunes store.

Maybe Bronfman ought to learn some game programming to see just how important “his” content really is.

[Caltech economics professor R. Preston] McAfee is one of a band of would-be reformers who are trying to beat the high cost — and, they say, the dumbing down — of college textbooks by writing or promoting open-source, no-cost digital texts.

Thus far, their quest has been largely quixotic, but that could be changing. Public colleges and universities in California this past year backed several initiatives to promote online course materials, and publishers and entrepreneurs are stepping up release of electronic textbooks, which typically sell at reduced prices.

McAfee is a leader in his academic field, a featured speaker at the Yahoo Big Thinkers India conference in March. Tall and genial, he dresses in khakis, a polo shirt and geeky river sandals. A coauthor of the best-selling book “Freakonomics,” Steven D. Levitt, has described him as brilliant. What McAfee is not is anti-capitalist.

“Im a right-wing economist, so they can’t call me a communist,” McAfee said.

Yet he turned down $100,000 to turn over his open-source textbook “Introduction to Economic Analysis” to a commercial publisher.

“What makes us rich as a society is what we know and what we can do,” he said. “Anything that stands in the way of the dissemination of knowledge is a real problem.”

McAfee said he wrote his open-source book because the traditional textbook market is broken. Textbook and college supply prices nearly tripled between 1986 and 2004, an audit by the federal Government Accountability Office found in 2005. With costs continuing to climb, it would be “reasonable to conclude that [individual student] expenditures can easily approach $700 to $1,000 today even after supplies are subtracted,” the congressional Advisory Committee on Student Financial Assistance said in a 2007 report.

“Publishers have broken an implicit contract with academics, in which we gave our time and they weren’t too greedy,” McAfee wrote on the web page for his book. McAfee said many publishers, going for the lowest common denominator, were making some books too simple.

Representatives of the textbook industry say they have invested in new products because instructors have demanded it.

In the last few months, CBS, Universal Music, Lionsgate, Electronic Arts and other companies have stopped prodding YouTube to remove unauthorized clips of their movies, music videos and other content and started selling advertising against them.

[...] So far, the money is minimal — ads appear on only a fraction of YouTube’s millions of videos — but the move suggests a possible thaw in the chilly standoff between the online video giant and media companies. Getting into the good graces of media entities is seen as critical to the future of YouTube, which has struggled to show appreciable revenue for video ads.

“We don’t want to condone people taking our intellectual property and using it without our permission,” said Curt Marvis, the president of digital media at Lionsgate Entertainment, which owns films like “Dirty Dancing” and the “Saw” series of horror movies.

“But we also don’t like the idea of keeping fans of our products from being able to engage with our content.” he said. “For the most part, people who are uploading videos are fans of our movies. They’re not trying to be evil pirates, and they’re not trying to get revenue from it.”

Indeed, the YouTube users who post the content without permission will not share in the advertising revenue generated by their posts. Instead, it is split between the media companies and YouTube.

The infringing user receives an e-mail message with an ominous red banner saying “a YouTube partner made a copyright claim on one of your videos.” The e-mail message explains that the media company has “authorized the use of this content” and that viewers may see advertising on the video.

So, now the media companies have found a way, via YouTube copyright claims, to appropriate creative content that makes “fair use” of copyrighted works? I wonder what the first appeal of YouTube’s “decision” is going to look like….

REMOVING her ex-husband from more than a decade of memories may take a lifetime for Laura Horn, a police emergency dispatcher in Rochester. But removing him from a dozen years of vacation photographs took only hours, with some deft mouse work from a willing friend who was proficient in Photoshop, the popular digital-image editing program.

[...] “In my own reality, I know that these things did happen,” Ms. Horn said. But “without him in them, I can display them. I can look at those pictures and think of the laughter we were sharing, the places we went to.”

“This new reality,” she added, “is a lot more pleasant.”

Man, the Times must have worked hard to get Ms. Horn to phrase things just right for them!

Anderson, along with his freshman-year roommate, R. J. Ryan, 22, and another student in the class, Alessandro Chiesa, 20, claimed in their project to have developed a way to hack into the MBTA’s recently installed $180 million automated fare-collection system and provide fellow hackers with “free rides for life.”

Not surprisingly, the T was not pleased to learn of the development. The agency, which is strapped for cash and contemplating a fare increase in 2010, successfully sued the students to prevent them from presenting their findings at DEFCON, a hacker’s convention that recently drew more than 6,000 people to the Riviera Hotel and Casino in Las Vegas.

The trio face a hearing in Boston’s federal court tomorrow when a temporary restraining order keeping them from releasing their findings expires.

The T, which did not return calls for this story, has said the students’ findings could cause “significant damage to the transit system.” The agency has also sued MIT, saying the institute failed to teach its undergraduates “to responsibly disclose information concerning perceived security flaws.”

The students strongly disagree, and their case has electrified the cowboy community of hackers, where the line is often blurry between those who break into a system so the system’s flaws can be exposed and patched and those who crack into a network merely to create mischief.